Ruble Drops 3% Amid Oil Price Cap... Russia Says "Weak Ruble Is Advantageous"

[Asia Economy Reporter Kwon Haeyoung] The value of the Russian ruble fell about 3% against the dollar on the 27th (local time) due to the implementation of the European price cap on Russian crude oil and the resulting forecast of decreased exports.

According to major foreign media on the day, the ruble-dollar exchange rate rose to 71.36 rubles. It approached last week's eight-month high (72.6325 rubles). The rise in the ruble-dollar exchange rate means the ruble's value has fallen accordingly.

BSC World of Investment stated, "As the trade environment changes and sanctions pressure intensifies, the market is likely to experience extreme volatility in the ruble toward the end of this month while seeking a new balance," adding, "This week, the ruble-dollar exchange rate is expected to move between 68 and 71 rubles."

[Image source=Yonhap News]

Despite the sharp rise in the dollar's value this year, the ruble has performed relatively well. This is analyzed to be due to capital controls and reduced imports.

Andrey Belousov, Russia's First Deputy Prime Minister, said, "With exports and imports decreasing, a decline in the ruble's value is more advantageous," adding, "While a strong ruble has played a role so far, under these conditions, it is better for the ruble-dollar exchange rate to move between 70 and 80 rubles."

Earlier, the European Union (EU), the Group of Seven (G7), Australia, and 27 other countries introduced a price cap on Russian crude oil starting from the 5th of this month as part of sanctions against Russia's invasion of Ukraine. They limited the price of Russian crude oil to below $60 per barrel and banned maritime services such as insurance and transportation for Russian crude oil exports exceeding the cap. In response, Russia retaliated by announcing it will suspend crude oil and petroleum product exports to countries that have implemented the price cap starting February next year.